1. Multinational Companies Organization Structure &Control Systems
© 2010 Pearson Prentice Hall

2. Lecture Learning Goals
Understand the importance of appropriate organizational structures to effective strategy implementation.
Become familiar with the types of organizational designs suitable for the level and scope of internationalization of the firm.
Be able to recognize why and when organizational restructuring is needed.
© 2010 Pearson Prentice Hall

3. Lecture Learning Goals
Realize how organizational design affects manager’s job, for example, on the level and location of decision making.
Emphasize the role of control and monitoring systems suitable for specific situations in the firm’s international operations.
© 2010 Pearson Prentice Hall

4. Opening Profile: Samsung Electronics Recognizes to Fight Downturn
Badly hit by the global economic downturn
Implemented a radical reorganization in 2009
Consolidating business operations into two operating divisions
Replaced the heads of five of its eight overseas operations
© 2010 Pearson Prentice Hall

5. Organizational Structure
Must evolve to accommodate internationalization
Should be contingency based
Must “fit” with strategy
© 2010 Pearson Prentice Hall

6. Organizational Structure

7. Evolution and Change in MNC Organizational Structures
Structural evolution/stage model
Alcoa
Created smaller units
Linked geographically dispersed, but similar businesses (e.g., Brazil and Australia)
© 2010 Pearson Prentice Hall

8. Evolution and Change in MNC Organizational Structures
Typical ways to structure international activities
* Domestic structure plus export department
* Domestic structure plus foreign subsidiary
*International division
* Global functional structure
* Matrix structure
* Global product structure
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9. Domestic Structure Plus Foreign Subsidiary
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10. Integrated Global Structures
International Division
Global Functional Structure
Organized along functional, product, or geographic lines
IBM World Trade
Pepsi Cola International
Designed on the basis of the company’s functions
Allows for functional specialization and economies of scale
© 2010 Pearson Prentice Hall

11. Integrated Global Structures: Global Product (Divisional) Structure
© 2010 Pearson Prentice Hall

12. Integrated Global Structures: Global Geographic (Area) Structure
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13. Organizational Structure

14. Organizing for Globalization
Differentiation
Focusing on and specializing in specific markets
Integration
Coordinating those same markets
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15. Organizing for Globalization
ROA
Moved away from its traditional geographic structure to a global structure
ABB is legendary in changing its organizational structure to fit its new strategic directions and its competitive environment.
© 2010 Pearson Prentice Hall

16. Organizing for Globalization
Be Global—
Act Local
Responding to local market structures and consumer preferences, along the globalization-regionalization continuum
Allows managers to act independently
Keeps some centralized control, but decentralizes control of foreign subsidiaries
© 2010 Pearson Prentice Hall

17. P&G’s Global/Local Structure
Management Focus: Proctor & Gamble’s “Think Globally—Act Locally” Structure
P&G’s Global/Local Structure
Philosophy
Global business units
Market Development Organizations (MDO)
Global Business Services (GBS)
Corporate functions
Think globally
Act locally
Enabling P&G to win with customers and consumers
Be the smartest/best
© 2010 Pearson Prentice Hall

18. Bartlett-Ghoshall

19. International

20. Multinational

21. Multinational
Nestlé
Peter Brabeck (Chief Executive of Nestlé): „Link with local consumers is very important to us. Therefore, our business remains fragmented and therefore we try to stay as close to the customer as possible.
(Financial Times, 13 March 2000)

22. Global

23. Transnational Network Structure
EXHIBIT Dell’s Value Web Model
© 2010 Pearson Prentice Hall

24. Matrix Structure and Transnational Company:
Attempts to combine:
The capabilities and resources of a multinational corporation
The economies of scale of a global corporation
The local responsiveness of a domestic company
The ability to transfer technology efficiently typically of the international structure
© 2010 Pearson Prentice Hall

25. Choice of Organizational Form
EXHIBIT Organizational Alternatives and Development for Global Companies
© 2010 Pearson Prentice Hall

26. Organizational Change and Design Needed When:
Clashes among divisions, subsidiaries, or individuals over territories or customers
Duplication of administrative or personnel services, sales offices, account executives
An increase in overseas customer service complaints
A shift in operational scope
Conflict between overseas and domestic staff
Centralization leads to excessive and, thus, misused or misunderstood data
Unclear reporting relationships
© 2010 Pearson Prentice Hall

27. Locus of Decision Making in an International Organization
EXHIBIT Locus of Decision Making in an International Organization
© 2010 Pearson Prentice Hall

28. Control Systems for Global Operations
Direct Coordinating Mechanism
Indirect Coordinating Mechanism
McDonald’s in Moscow
Problem: quality control
Solution: built processing plant in Moscow and provided managerial training
Other options: visits by head- office personnel and regular meetings
Examples: sales quotas, budgets, and financial tools and reports
Three financial statements
One for accounting standards in host country
One for the standards in the home country
One for consolidation
© 2010 Pearson Prentice Hall

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30. Seminar (11.4.2011) Read the case Acer (is.muni.cz)
In your groups, discuss and answer these questions:
In your opinion, can Acer’s growth in the global arena be attributed to the restructuring of its operations? Give reasons to support your answer.
Write a note on the growth path adopted by Acer in India. What should Acer do now to take advantage of the opportunities presented by the Indian market?
Do some research on Acer and give an update on the company’s situation in India and also globally as of the time of your reading this case.
Prepare a SHORT presentation of your results
Since 2008, the global economy has been greatly affected by the economic downturn. How has this affected the strategies of those companies who went “global” in the early 2000s? Select two companies in different fields and evaluate their changing strategies as a result of the economic downturn

31. http://www.umanitoba.ca/libraries/units/managem ent/DoingBusiness/eastern_europe02.pdf

32. Thank you for attention!